Questions I’ll try to answer
• Why do we want to understand and predict choices?
• Why is this especially important and challenging
now?
• How do we do it?
• Who is doing this, and are we the right people?
• Do we do it the right way?
• What can we learn from behavioural economics?
• What are the challenges and opportunities?
Why do we want to understand and predict choices?
Why is this especially important and
challenging now?
Need understanding and prediction of demand
Some big decisions are needed
Making choices in a difficult climate
Life is more and more digital
… and more international
How do we do it?
Understanding and prediction
Valuation of
individual
components and
overall valuation
Forecasting of
choices/demand
in specific
scenarios
Used across disciplines
Who is doing this?
Are we the right people?
Do we do it the right way?
(A selection of the) leading modellers
We often treat choices in isolation …
Short term
vs medium term
vs long term
Transport
vs energy
vs health
….
… and generally look at individual people
Reality is more complicated
Are we modelling the right things?
Transport dominates, but main emphasis on short term choices
Other fields are catching up
Long term choices under-researched
There are other experts on behaviour!
The BBC’s love of Daniel Kahneman
System 1 vs system 2 – fast vs slow
A new dawn?
• “… synthesize a new behavioral science of pleasure [extending] into areas of individual sensation of well-being and choice in the context of social network information and approval …”
Do these theories apply in real world behaviour?
Or in hypothetical choices?
Modelling not just for the sake of it
vs.
Zero cost: Ariely chocolate experiments
$0.15 73% $0.01 27%
$0.14 31% $0.00 69%
… an example from real life
£0 to £5 £5 to £8
… and it happens in SP too
Option with lowest toll chosen
Willingness to pay higher toll for reduced slowed
down time
No zero toll option 40.6% AUD 13.2/hr
Zero toll option available 74.7% AUD 11.9/hr
Framing & mental accounts
Testing this with SP Time vs money (5 tasks)
Time vs safety (5 tasks)
Safety vs money (5 tasks)
Option A Option B
Travel time 58 mins 48 mins
Travel cost £9.00 £11.00
Your choice X
Option A Option B
Travel time 54 mins 49 mins
Injuries per year 4,000 4,500
Your choice X
Option A Option B
Injuries per year 3,500 4,500
Travel cost £12 £8
Your choice X
time vs cost
(p/min)
safety vs time (min/ 1000 acc)
safety vs cost (£/
1000 acc)
estimated 11.07 42.75 3.34
inferred 7.81 30.15 4.73
bias in inferred -29.47% -29.47% 41.79%
Impact of peers, attitudes, and nudging
Share of hybrid vehicles
United States ca 3% (vehicles)
RSG 22% (employees)
RSG (drive to work) 26% (employees)
Anchoring: real life cost referencing
… similar effects in value of time work
Base model:
22.28DKK/hr
With anchor
(at mean):
26.95DKK/hr
Route 1 45 minutes 25 DKK
Choose route 1
Route 2 37 minutes 31 DKK
Choose route 2
Choice sets can influence the choices
Online only Print only Print & online
16% 0% 84%
68% removed 32%
… we tend to ignore this in modelling
WTP large vs compact, only one fuel type available $1,638
large vs compact petrol, large hybrid available $5,963
large vs compact hybrid, large petrol available $14,731
… predictably
irrational?
Losses are more painful than gains
… but reality is complex
Date Toll Vehicles per day
August 2005 (opening) AUD 3.5 20K
October 2005 AUD 3.5 23K
November 2005 (free month) free 50.5K (+27.5K)
December 2005 AUD 3.5 26.5K (-24K)
March 2006 (half toll) AUD 1.75 34K (+7.5K)
July 2006 AUD 3.5 30K (-4K)
Does it matter?
What are the challenges and opportunities?
Does a richer individual representation make much overall difference?
Observation/understanding vs prediction
Is SP (or other experimental) data valid?
Thurstone (1930s):
hypothetical
choices
Wallis and Friedman (1942):
“The responses are valueless
because the subject cannot
know how he would react.”
Best (& big) data often not accessible to us
What should we do next?
Lots of exciting things are happening already
Let’s not kill RUM yet!
How
mu
ch
I r
eg
ret m
y d
ecis
ion
Distance travelled on a roller
coaster
Build bridges
Questions